Coal Industry has a pulse — Someone tell Trump job prospects still suck


Click to enlargeLuke Sharrett/Bloomberg News

❝ The battered U.S. coal industry is showing flickering signs of life. Yet the prognosis for Big Coal remains dim.

Coal prices are about double what they were a year ago. Rail car deliveries of coal are up 16 percent this year. The more than 50 coal mining companies that went bankrupt over the past couple of years have unloaded billions of dollars of debt. And President Trump has vowed to roll back environmental regulations that the industry says are part of a “war on coal.”

❝ But the obstacles on the other side of the ledger remain daunting: Coal-fired power plants continue to shut their doors. Bountiful supplies of U.S. shale gas are keeping natural gas prices low and competitive, and renewable sources of power generation are growing rapidly. Though most experts expect U.S. coal sales and output to top last year’s levels, they also expect the decline to resume in 2018.

“The coal industry is saying it’s back. It’s not back,” said Tom Sanzillo, director of finance at the Institute for Energy Economics & Financial Analysis. “This is a fool’s errand.”

…Metallurgical coal will be needed to make steel in India and China and in the United States, especially if there is a boost in infrastructure spending. And thermal coal will still be used to generate electricity for years, even if at lower rates.

But to show profits, coal operators will have to trim output from the oldest, least-efficient mines in Appalachia (where Trump garnered crucial votes in the election) and shift their focus to the Illinois Basin and the Powder River Basin in Wyoming.

Those big open-pit mines need fewer workers — doing nothing to help Trump bring back jobs for “our great miners.”

And if you’re shipping open-pit coal to China and India, there are operations in existence – and/or getting ready to come onstream in Australia – that will have a lot less freight added into costs than the black stuff from North America.

Advertisements

High school math kills Trump’s infrastructure plan


Always ready to help a fellow New Yorker

❝ In his address to Congress…President Donald Trump once again brought up his support for a large infrastructure package. And there’s good reason for this: It’s not nearly as polarizing as most other parts of his agenda and would stimulate economic growth in a way that would benefit blue-collar workers who were key to his election. But like much of his agenda, it’s short on details, and the labor-market math doesn’t add up.

❝ Here’s the napkin version. The trillion-dollar package being discussed is understood to be $100 billion of spending per year for 10 years. Leave aside the fact that infrastructure spending is notoriously messy and slow, as environmental delays and other project-specific concerns make it hard to spend the money as fast as a policymaker or economist would like. The labor question alone shows that this vision is impossible.

❝ There are currently 6.8 million construction employees in the U.S. Annualized construction spending in the U.S. at the end of 2016 was $1.18 trillion. Dividing the two, we see that one construction worker supports around $175,000 in construction spending. (This doesn’t mean that construction workers make $175,000 per year — that figure accounts for other labor-supporting projects and building materials.)

One more simple calculation shows the daunting labor needs. If one construction worker can support $175,000 worth of construction projects, then $100 billion in spending each year would require an additional 570,000 construction workers, which doesn’t take into account truck drivers, project managers, environmental specialists, and all other support staff needed to complete projects. Perhaps infrastructure spending, which comprises 25 percent of all construction spending, is a little less labor-intensive than other types of construction spending. Maybe the shrewd administrative talent of this White House could generate some labor efficiencies. That still probably means 400,000 or 500,000 construction workers needed, not 50,000.

❝ How realistic is construction employment growth of 570,000 workers? It hasn’t happened since 1946. Even the peak of the housing bubble generated only one brief year-over-year increase of 500,000 construction workers.

The infrastructure proposal is among Trump’s most politically viable, but economics will kill it.

RTFA for the rest of the gory details. Trump is not only incompetent to develop and lead our nation into a construction project of national importance — he isn’t cunning enough to seek out advice and structural leadership from any of the talent we have in abundance in the GOUSA.

Arms sales around the world are the highest they’ve been since the end of the Cold War


Noah Seelam/AFP

❝ Global arms sales over the last five years reached their highest level since 1990, with India continuing to top the charts as the world’s largest defense importer, a report from the Stockholm International Peace Research Institute has found.

Between 2012 and 2016, India accounted for 13 percent of global arms imports, followed by Saudi Arabia, the United Arab Emirates, China and Algeria, said SIPRI, which tracks global arms purchases. Between 2007 and 2011, India accounted for 9.7 percent of global imports, still more than any other country…

❝ Despite rising threats, and a ‘Make in India’ program to encourage local arms production, India’s domestic defense sector is not capable of meeting New Delhi’s growing requirements…

“They spend a lot of time and also money trying to develop weapons in India and things just go hopelessly wrong,” Siemon Wezeman, a senior researcher with SIPRI, said, adding that leaves them relying on imports…

❝ …The shift under Modi to rely more on private Indian companies for defense procurement, could lead to success. India signed an $8.7 billion contract to buy 36 Rafale jets from Dassault Aviation SA…Analysts also warned that structural changes to India’s defense purchasing would take a long time, given the lengthy timelines involved in defense R&D and manufacturing, as well as the necessity of meeting the military’s pressing requirements for combat-ready equipment.

RTFA for the gory details. Getting caught in the same sort of military-industrial complex that only shares ownership of the US economy with fossil fuel barons doesn’t seem like forward-looking economic design or planning. India might have more of a chance at long-term economic success working at building a mutual relationship based on peace with neighbors in the region. After all, they all were shoved into the same trick bag by departing Imperial England back in the day.

People who help you die better

❝ Thirty years ago a young anaesthetist, newly appointed as head of department at Calicut Medical College Hospital in the Indian state of Kerala, encountered a case that would change his life.

❝ A college professor aged 42 with cancer of the tongue had been referred to him by an oncologist. The man was in severe pain and the anaesthetist, Dr. M R Rajagopal, was asked if he could help. He injected the mandibular nerve in the jaw in a procedure known as a nerve block and told the patient to return in 24 hours. Next day, the pain had almost completely gone and Dr. Raj, as he is known, was pleased with his work.

“He asked me when he should come back. I told him there was no need to come back, unless the pain returned. I thought he would be happy I had cured the pain. Instead, he went home and killed himself that night.”

❝ It turned out that the oncologist had avoided explaining to the college professor that his cancer was terminal. Instead he had said he was referring him for further treatment.

“It was only when I told him there was no need to come back that he realised his cancer was incurable. He went home and told his family it was all over.”…

❝ …His patient’s suicide showed him that treating the pain was not enough…“I realised that thinking about nerve blocks was too narrow. Pain is just the visible part of the iceberg of suffering. What is ignored is the part below the surface — feelings of hopelessness and despair, worries about money, about children. That is what palliative care is about. That man gave up his life to help me understand it.”

RTFA. Please. I worked in a small way with those who brought the hospice concept to the United States. Palliative care should be a right for every human being. That’s not so easy in a nation whose government considers healthcare a privilege – and treats it as such.

Click the link. Read this tale.

Our #1 Export is Debt — Fewer foreigners are willing to buy


Mandel Ngan/AFP/Getty Images

❝ Since he first hit the campaign trail, Trump has been squarely focused on boosting domestic production by limiting cheap imports from places like China and Mexico and replacing them with homegrown offerings. Much more rarely has he talked about selling those homegrown offerings — be they Ford Explorers or Boeing 747s — to the rest of the world.

It’s a curious state of affairs, like encouraging people to cook by banning restaurants. Disconcertingly, Trump’s brand of import substitution is now playing out in the world’s biggest debt market.

❝ Debt is, without a doubt, the U.S.’s biggest export. The U.S. Treasury market is not just worth trillions ($13.9 trillion, to be exact), but also represents the “risk-free” rate against which other financial assets are judged, if not fully pegged. To overstate its importance is difficult: It is huge, big-league — one of the few markets to which Trump’s brand of hyperbole might actually apply.

And yet U.S. Treasuries have been finding far fewer foreign buyers in recent months — a trend that has so far been offset by higher domestic demand. U.S. investors have been buying longer-term government debt at a record pace since June, while recent data shows Japanese buyers, the biggest owners of U.S. Treasuries, have reduced their holdings for two consecutive months…

❝ Adversaries of import substitution have long argued that the strategy boosts short-term growth at the expense of longer-term health. It flies in the face of comparative advantage — a central tenet of classical economic theory — and precludes economies from enjoying all of the benefits that come with specialization, including lower prices.

A similar dynamic applies to the transformation of the U.S. Treasury market. While a pickup in domestic demand can initially help offset selling by foreign investors — such as the People’s Bank of China attempting to stabilize the yuan or Saudi Arabia reducing reserves to deal with lower oil prices — it may well leave the market more fragile over the longer term.

❝ U.S. pension funds, banks and insurance companies can opt to “Buy American” with Treasuries, but there are limits and there are risks. Those risks became painfully clear during the eurozone debt crisis, when troubled European Union members used central bank liquidity facilities to buy their own debt after foreign buyers went on strike. The move helped them weather the worst of the crisis, but it also became a pressure point as investors fretted over a “feedback loop” of codependency and negative sentiment between banks and bonds.

❝ Perhaps more relevant to Trump’s ambitions are the self-apparent limits that a domestically funded budget will put on his growth plans. The president wants to boost fiscal stimulus while cutting taxes — a plan that will only work as long as the U.S. is able to issue and sell its debt. Few think that foreigners will stop purchasing U.S. debt altogether, but the loss of a significant pool of players will by definition place a cap on the market.

Sad.

This is an opinion piece at Bloomberg — by Tracy Alloway. She is one of the sharpest people on that payroll – witness her current role as co-host on Bloomberg TV Middle East from Abu Dhabi as well as a managing editor at Bloomberg Markets.

Kansas politicians aren’t bright enough – yet – to halt stupid economics. Getting close, though.

❝ It was only two months ago that Governor Sam Brownback was offering up the steep tax cuts he enacted in Kansas as a model for President Trump to follow. Yet by the time Republicans in Congress get around to tax reform, Brownback’s fiscal plan could be history — and it’ll be his own party that kills it.

❝ The GOP-controlled legislature in Kansas nearly reversed the conservative governor’s tax cuts…as a coalition of Democrats and newly-elected centrist Republicans came within a few votes of overriding Brownback’s veto of legislation to raise income-tax rates and eliminate an exemption for small businesses that blew an enormous hole in the state’s budget. Brownback’s tax cuts survive for now, but lawmakers and political observers view the surprising votes in the state House and Senate as a strong sign that the five-year-old policy will be substantially erased in a final budget deal this spring. Kansas legislators must close a $346 million deficit by June, and years of borrowing and quick fixes have left them with few remaining options aside from tax hikes or deep spending cuts to education that could be challenged in court. The tax bill would have raised revenues by more than $1 billion over two years.

❝ The Brownback blowback has been a long time coming. Though he won reelection in 2014, the governor has presided over one budget mess after another since then, and all but his staunchest conservative allies have blamed the crisis on reductions in personal tax rates and a provision that exempted 330,000 owners of small businesses from paying income taxes. Brownback has resisted efforts to undo the policies, preferring instead to raise taxes on tobacco, fuel, and other consumer goods. His relationship with Republicans in the legislature deteriorated, and in primary and general elections last year, a wave of Democrats and centrist Republicans defeated many of the conservatives who had stood by him.

The constant Republican fallback to stupid economics experiments. When it falls apart, bills come due, regressive taxes on goods for personal consumption are always the the ultimate quick fix. For corrupt conservative pols.

❝ The GOP may retain a majority in both chambers, but Brownback most definitely does not. “What we’re having is a standoff with the governor holding on to the old days where he had all these people elected,” said Senator Barbara Bollier, a moderate Republican who voters promoted from the state House last year. “They aren’t there anymore, and he can’t let go and follow the will of the people.”

As for Brownback’s legacy, Bollier said: “It’s going down in flames.”

RTFA. Brownback is the kind of economic dunce that Trump and his neo-con cadre in Congress count on for ideas. Hopefully, he’ll screw-up sufficiently that it won’t take the dullest American voters 2 terms to perceive what smells like shite — probably is.

Scientists in Oz crack the carbon-fibre code


Would be nice to have carbon-fibre for less than $450K

❝ Australia’s CSIRO has cracked the carbon-fibre code, and in doing so has opened the floodgates to mass-production of the composite material in Australia.

❝ Currently only a handful of companies around the world are able to manufacture carbon-fibre, each with their own closely-guarded secret recipe. But none have, as yet, cracked the method to producing ultra-lightweight, ultra-strong composite in significant quantities.

But now, CSIRO and Deakin University have, as they put it, “cracked the code” to mass-production through the use of a patented wet spinning line which can produce carbon-fibre that is both stronger and of a higher quality than previously produced…

❝ The CSIRO has patented the technology which has the potential to be a game-changer for the automotive industry. With current technology cost-prohibitive for wider use, carbon-fibre is usually found only on high-end luxury cars or supercars.

With the potential to now mass-produce the composite material, carbon-fibre is set to be cheaper than ever before, possibly leading to application in mass-produced vehicles. Lighter body panels would make cars even more fuel efficient, no bad thing in this day and age of climate change.

❝ The Director of CSIRO Future Industries, Dr Anita Hill, said the development was an important discovery that has the potential to disrupt the status quo in the carbon-fibre industry.

“This facility means Australia can carry out research across the whole carbon fibre value chain: from molecules, to polymers, to fibre, to finished composite parts,” said Dr Hill.

“Together with Deakin, we’ve created something that could disrupt the entire carbon-fibre manufacturing industry.”

More geek globalism providing a market common to existing and emerging industrial nations. It’s enough to make a parochial knee-bender sweat.

Thanks, Honeyman